Rather than making a knee-jerk rejection, the Association of British Insurers (ABI) should follow Aegon UK’s lead by focussing on fairness and affordability when considering the latest Financial Services Compensation Scheme (FSCS) funding proposals.
The ABI is against sharing the FSCS costs with advisers on the basis that insurers have very little direct influence over brokers and advice firms. Note that the terms confirm they do have some direct influence, while implying that they probably have considerable indirect influence. These comments demonstrate how unfair the current funding method of the FSCS is – with the adviser community paying 100 per cent, while having zero possibility of controlling, influencing, or stopping those firms that create the liabilities.
Huw Evans, director general of the ABI, is reported to have said: “…expecting providers to foot the bill for intermediaries they have no control over is entirely misplaced.” This is exactly the situation advisers face year in, year out.
I have fought for years to get this grotesque injustice changed and the FCA’s proposals are an important first step towards a more equitable system. However, a provider contribution of 25 per cent is still nowhere near enough to reflect their influence and knowledge. If the FCA is serious about wanting to reduce the FSCS liabilities – and I am sure it is – providers should contribute by far the largest proportion of the levies. The insurers have detailed knowledge of the business done by every authorised firm and could dramatically cut the FSCS liabilities by spotting rogue firms. This will only happen if insurers have a financial interest in reducing the liabilities, which end up falling on the FSCS.
Far from objecting to these proposals, the ABI should take this opportunity to create a central register to co-ordinate intelligence from insurers on suspected rogue advice firms, so action can be taken to protect clients. This will substantially reduce the FSCS liabilities and save consumers a lot of heartache.
Aegon’s pension director, Stephen Cameron, rightly highlights that Aegon has always supported providers paying a greater share of the levies and that the FCA’s proposals should be examined on grounds of fairness and affordability. I know this common sense view from Aegon is shared by many other providers who are ABI members. I urge them to ensure that the ABI rethinks its rejection of the FCA’s proposals and supports a solution that is fair to all financial services sectors.
Ken Davy is chairman of SimplyBiz